Wage determination in the unionized Private sector in Kenya, 1980-1997

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Abstract
This paper analyses the determinants of real wages in the unionized private sector
In Kenya from 1980 to 1997. Despite the existing wage policies being enforced by the
Kenya government through its various machineries such as the industrial court and
Continued union representation of workers in collective bargaining, real wages of
Unionized private sector workers have continued to fall overtime. In the period 1980-97,
Real wages of unionized private sector workers fell by 36.84 percent despite an overall
Improvement in the private sector real wages of 11.34 percent during the same period.
Unionized workers were therefore 48.18 percent worse off than their non-unionized
Counter-parts in the same sector.
The main objective of this study was to find out factors that determine unionized
Private sector real wages in Kenya. Empirical analysis was carried out using time series
Secondary data to determine how various factors affect negotiated real wages. These
Factors included one year lagged negotiated real wage, statutory minimum real wage,
Union strength, real GDP growth, labour productivity, tax rate, rate of interest on capital
And its one year lagged effect, and a dummy variable to capture the effect of wage
Guidelines.
Using two stage least squares (2sls) regression technique, the parameter
Estimates of one year lagged negotiated real wage, statutory minimum real wage, rate of
Interest and its one year lagged effect were found to be statistically different from zero
At the 10 percent significance level. However, when the results were analysed at 95
Percent confidence level, coefficients of all the variables above remained to be
Statistically significant except that of current rate of interest. The rest of coefficients of
The variables in the model namely, union strength, real GDP growth, labour productivity,
Tax rate and the dummy for wage guidelines were found to be insignificant both at 90 and
95 percent levels of confidence. The regression results further showed that lagged real
Wage, statutory minimum real wage, union strength, tax rate and the dummy for wage